BROKER-DEALER AGREEMENT
between
DEUTSCHE BANK TRUST COMPANY AMERICAS
and
JEFFERIES & CO.
Dated as of April 7, 2003
Relating to
DUTCH AUCTION RATE TRANSFERABLE SECURITIES
PREFERRED STOCK
SERIES A & B
Of
XXXX XXXXXXX PATRIOT PREMIUM DIVIDEND FUND II
BROKER-DEALER AGREEMENT dated as of April 7, 2003 between Deutsche Bank
Trust Company Americas, a New York corporation (not in its individual capacity
but solely as agent of the Company pursuant to authority granted to it in the
"Trust Company Agreement) (together with its successors and assigns, the "Trust
Company"), and Jefferies & Co., a California corporation (together with its
successors and assigns, "BD").
The Company has issued 500 shares of Dutch Auction Rate Transferable
Securities Preferred Stock Series A (the Series A "DARTS") and 500 Shares of
Dutch Auction Rate Transferable Securities Preferred Stock Series B (the Series
B "DARTS" and, together with the Series A DARTS, the "DARTS") pursuant to its
Amended and Restated Agreement and Declaration of Trust ("Declaration of Trust")
and its Amended and Restated By-Laws (the "By-Laws").
The By-Laws provide that the dividend rate on the shares of each series of
the DARTS for each Dividend Period with respect to such series after the initial
Dividend Period with respect to such series shall be the Applicable Rate, which
shall, except under certain circumstances, be the rate per annum that a bank or
trust company appointed by the Company advises results from implementation of
the Auction Procedures with respect to the DARTS of such series. The Board of
Trustees of the Company has adopted a resolution appointing Deutsche Bank Trust
Company Americas for purposes of implementing the Auction Procedures and related
matters. Pursuant to Section 2.5 (d) of the Trust Company Agreement, the
Company has requested and directed the Trust Company to execute and deliver this
Agreement.
The Auction Procedures require the participation of one or more Broker-
Dealers.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Trust Company and BD agree as follows:
1. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. TERMS DEFINED BY REFERENCES TO DECLARATION OF TRUST AND BY-LAWS.
Capitalized terms not defined herein shall have the respective meanings
specified in the Company's Declaration of Trust and By-Laws.
1.2. TERMS DEFINED HEREIN. As used herein in the Settlement Procedures, the
following terms shall have the following meanings, unless the context otherwise
requires:
(a) "Auction" shall have the meaning specified in Section 2.1 hereof.
(b) "Auction Procedures" shall mean the auction procedures as set forth
in Section 9 of Article VI of the By-Laws.
(c) "Authorized Officer" shall mean each Senior Vice President, Vice
president, Assistant Vice President, Assistant Manager and Trust Officer
of the Trust Company assigned to its Corporate Trust Department and every
other officer or employee of the Trust Company designated as an
"Authorized Officer" for purposes of this Agreement in a communication to
BD.
(d) "BD Officer" shall mean each officer or employee of BD designated as
a "BD Officer" for purposes of this Agreement in a communication to the
Trust Company.
(e) "Broker-Dealer Agreement" shall mean this Agreement and any
substantially similar agreement between the Trust Company and a Broker-
Dealer.
(f) "By-Laws" shall mean the Company's Amended and Restated By-Laws as
adopted by the Company's Board of Trustees on September 6, 1990, a copy of
which is attached hereto as Exhibit A, as the same may be amended from
time to time.
(g) "Company shall mean Xxxx Xxxxxxx Patriot Premium Dividend Fund II, a
Massachusetts business trust, and its successors and assigns.
(h) "Declaration of Trust" shall mean the Agreement and Declaration of
Trust of the Company as filed by the Company in the office of the
Secretary of State of the Commonwealth of Massachusetts on December 14,
1989, and as amended and restated on December 12, 1989, a copy of which is
attached hereto as Exhibit B.
(i) "Prospectus" shall mean the prospectus dated December 14, 1989
relating to the issuance and offering of the shares of the DARTS.
(j) "Purchaser's Letter" shall mean a Master Purchaser's Letter
substantially in the form attached hereto as Exhibit C.
(k) "Settlement Procedures" shall mean the Settlement Procedures
attached hereto as Exhibit D.
(l) "Summary" shall mean a summary description of the DARTS and the
Auction Procedures and Settlement Procedures with respect thereto.
(m) "Trust Company Agreement" shall mean the Trust Company Agreement,
dated as of December 21, 1989, between the Company and the Trust Company
relating to the DARTS.
1.3. RULES OF CONSTRUCTION. Unless the context or use indicates another or
different meaning or intent, the following rules shall apply to the construction
of this Agreement:
(a) Words importing the singular number shall include the plural number
and vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Agreement nor shall they
affect the meaning, construction or effect of any provision hereof.
(c) The words "hereof," "herein," "hereto," and other words of similar
import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New
York City time.
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2. THE AUCTION. Separate Auctions will be held for the Series A DARTS and
the Series B DARTS. Unless the context otherwise requires, references to the
DARTS in this Section shall be deemed references to the Series A DARTS or the
Series B DARTS, as the case may be.
2.1. PURPOSE; INCORPORATION BY REFERENCE OF AUCTION PROCEDURES AND SETTLEMENT
PROCEDURES.
(a) The provisions of the Auction Procedures will be followed by the
Trust Company for the purpose of determining the Applicable Rates for the
DARTS. Each periodic operation of such Auction Procedures is hereinafter
referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their
entirety and shall be deemed to be a part of this Agreement to the same
extent as if such provisions were fully set forth herein.
(c) Unless BD has heretofore done so, BD is delivering herewith a
Purchaser's Letter executed by BD. BD agrees to act as, to assume the
obligations of, and to be subject to the limitations and restrictions
placed upon, a Broker-Dealer under this Agreement. BD understands that
other Persons meeting the requirements specified in the definition of
"Broker-Dealer" contained in Section 6.9 (a) (vii) of Article VI of the
By-Laws may execute Broker-Dealer Agreements and Purchaser's Letters and
participate as Broker-Dealers in Auctions. BD agrees to handle customer
orders in accordance with its respective duties under applicable
securities laws and rules.
(d) BD and other Broker-Dealers may participate in Auctions for their
own accounts, provided that BD or such other Broker-Dealers, as the case
may be, have executed and deposited with the Trust Company a Purchaser's
Letter. However, the Company may, by notice to BD and all other Broker-
Dealers, prohibit all Broker-Dealers from submitting Bids in Auctions for
their own account, but the Broker-Dealers may continue to submit Hold and
Sell Orders. The Trust Company shall have no duty or responsibility to
monitor the provisions of this Section 2.1 (d).
2.2. PREPARATION FOR EACH AUCTION.
(a) Not later than 9:30 on each Auction Date, the Trust Company shall
advise the Broker-Dealers by telephone of the 60-day "AA" Composite
Commercial Paper Rate, The Minimum Applicable Rate and the Maximum
Applicable Rate.
(b) In the event that the Auction Date for any Auction shall be changed
after the Trust Company has given notice referred to in clause (vii) of
paragraph (a) of the Settlement Procedures, the Trust Company, by such
means as the Trust Company deems practicable, shall give notice of such
change to BD not later than the earlier of 9:15 A.M. on the new Auction
Date or 9:15 on the old Auction Date. Thereafter, BD shall promptly
notify its customers whom BD believes are Existing Holders of shares of
the DARTS of such change in Auction Date.
(c) For each Auction Date for which BD submits an Order for any Bidder
which is accepted, BD shall maintain, for a period of at least fifteen
months, a list of such Holder or Holders and the number of shares of DARTS
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held by each such Holder (Holder Lists"). The Trust Company or the
Company from time to time may request BD and each other Broker-Dealer to
provide the Trust Company or the Company with any such Holder Lists and/or
with a list of their respective customers that BD and such Broker-Dealers
believe are Existing Holders of shares of the DARTS. BD shall comply with
any such request, and the Trust Company and the Company shall not disclose
any such information so provided to any Person except as provided and in
accordance with Sections 2.2 (f), 2.7 and 4.7 of the Trust Company
Agreement.
(d) The Trust Company is not required to accept the Purchaser's Letter
of any Potential Holder who wishes to submit a Bid for the first time in
an Auction or any amendment to a Purchaser's Letter of any Potential
Holder or Existing Holder who wishes to amend its Purchaser's Letter
intending that such amendment is to take effect with respect to an
Auction, unless such Purchaser's Letter or such amendment is received by
the Trust Company by 3:00 P.M. on the Business Day preceding such Auction
Date.
2.3. Auction Schedule: Method of Submission of Orders.
(a) The Trust Company shall conduct Auctions in accordance with the
schedule set forth below. Such schedule may be changed by the Trust
Company with the consent of the Company, which consent shall not be
unreasonably withheld. The Trust Company shall give written notice of any
such change to BD. Such notice shall be received prior to the first
Auction Date on which any such change shall be effective.
Time on Auction Date Event
By 9:30 A.M. Trust Company advises Company and
Broker-Dealers of 60-day "AA" Composite
Commercial Paper Rate, the Minimum
Applicable Rate and the Maximum
Applicable Rate as set forth in Section
2.2 (a) hereof.
Between 9:30 A.M. and 12:30 P.M. Trust Company assembles information
communicated to it by Broker-Dealers as
provided in Section 6.9 (c) of Article
VI of the By-Laws.
Submission Deadline is 12:30 P.M. or
such other time on any Auction Date as
the Trust Company specifies.
After 1:00 P.M. Trust Company makes determinations
pursuant to Section 6.9 (d) (i) of
Article VI of the By-Laws.
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By approximately 3:00 P.M. Trust Company advises Company of results
of Auction as provided in Section 6.9
(d) (ii) of Article VI of the By-Laws.
Submitted Bids and Submitted Sell Orders
are accepted and rejected and shares of
the DARTS allocated as provided in
Section 6.9 (e) of Article VI of the
By-Laws. The Trust Company gives notice
of Auction results as set forth in
Section 2.4 (a) hereof.
(b) BD agrees to maintain a list of Potential Holders to contact the
Potential Holders on such list on or prior to each Auction Date for the
purposes set forth in Section 6.9 of Article VI of the By-Laws, and to
deliver to each Potential Holder prior to such Potential Holder's initial
participation in an Auction (i) a Prospectus, if such delivery is in the
90-day period following the date of the Prospectus, or (ii) a Summary, if
such delivery is thereafter.
(c) BD agrees not to sell, assign or dispose of any shares of the DARTS
to any Person who has not delivered a signed Purchaser's Letter to the
Trust Company.
(d) BD shall submit Orders to the Trust Company in writing in
substantially the form attached hereto as Exhibit E or by electronic
transmission of a type acceptable to the Trust Company. BD shall submit
separate Orders to the Trust Company for each Potential Holder or Existing
Holder on whose behalf BD is submitting an Order and shall not net or
aggregate the Orders of different Potential Holders or Existing Holders on
whose behalf BD is submitting Orders.
(e) BD shall deliver to Trust Company a written notice, substantially in
the form attached hereto as Exhibit F, of transfers of shares of the DARTS
made through BD by an Existing Holder to another Person other than
pursuant to an Auction and, subject to the terms of Section 2.2 (d)
hereof, shall deliver or cause to be delivered the related Purchaser's
Letter executed by such Person if such Person has not previously so
delivered or caused to be delivered a Purchaser's Letter. BD shall
deliver a written notice, substantially in the form attached hereto as
Exhibit G, of the failure of any shares of the DARTS to be transferred to
or by any Person that purchased or sold shares of the DARTS through BD
pursuant to the Auction. The Trust Company is not required to accept any
notice specified in this section 2.3 (e) intended to take effect with
respect to an Auction unless it is received by the Trust Company by 3:00
P.M. on the business Day preceding the related Auction Date.
(f) BD on or prior to the Date of Original Issue shall provide the Trust
Company with a list of the initial Existing Holders of the shares of the
DARTS who purchased such shares through BD, if any. In order to verify
the accuracy and authenticity of the list of Existing Holders so provided
or the Holder Lists provided pursuant to Section 2.2 (c), the Trust
Company may confirm those lists by sending confirmation notices containing
lists ("confirmation lists") of the Existing Holders or prior Holders, as
the case may be, to BD within ten Business Days of the Trust Company's
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receipt thereof. If the lists contained in any confirmation list received
by BD shall not conform to the original list of Existing Holders or
Holders Lists provided by BD to the Trust Company, BD shall notify the
Trust Company of such discrepancy within two Business Days after its
receipt of the Trust Company's confirmation lists. Subject to any change
based on any discrepancy notified to the Trust Company by BD, the
confirmation lists sent by the Trust Company shall, in the absence of
manifest error, be binding and conclusive on the Company and BD.
(g) BD agrees to handle its customer's Orders in accordance with its
duties under applicable securities laws and rules.
2.4. NOTICES.
(a) On each Auction Date, the Trust Company shall notify BD by telephone
as provided in paragraph (a) of the Settlement Procedures. By
approximately 10:30 A.M. on the Business Day next succeeding such Auction
Date, the Trust Company shall notify BD in writing of the disposition of
all Orders submitted by BD in the Auction held on such Auction Date.
(b) BD shall notify each Existing Holder or Potential Holder on whose
behalf BD has submitted an Order as provided in paragraph (b) of the
Settlement Procedures and take such other action as is required of BD
pursuant to the Settlement Procedures.
(c) If the number of Dividend Period Days is increased as provided in
Section 6.4 (b) (i) of Article VI of the By-Laws, the Trust Company shall
provide BD with a form of notice of such change not later than five days
after the receipt of such form of notice by the Trust Company from the
Company. BD shall mail a copy of such notice (at the address specified in
such Existing Holder's Purchaser's Letter) to each Existing Holder which
acquired through BD, and, to the knowledge of BD, has not disposed of its
shares of the DARTS, at least 10 days prior to the first day of the
Dividend Period for which such change is to be effective.
2.5. SERVICE CHARGE TO BE PAID TO BD. On each Dividend Payment Date for the
DARTS, the Trust Company shall pay to BD from monies received from the Company
an amount equal to the product of (i) a fraction, the numerator of which is the
number of days in the Dividend Period beginning on such Dividend Payment Date
(calculated by counting the first day but excluding the last day of such
Dividend Period) and the denominator of which is 360, (ii) 1/4 of 1%, (iii)
$100,000 and (iv) the sum of (A) the aggregate number of the shares of the DARTS
placed by BD in such Auction that were (x) the subject of Submitted Bids of
Existing Holders submitted by BD and continued to be held as a result of such
submission and (y) the subject of Submitted Bids of Potential Holders submitted
by BD and were purchased as a result of such submission, (B) the aggregate
number of shares of the DARTS subject to valid Hold Orders submitted to the
Trust Company by BD and (C) the number of shares of the DARTS that were covered
by Hold Orders deemed to have been submitted by Existing Holders and that were
acquired by such Existing Holders through BD. For purposes of subclause (iv)
(C) of the foregoing sentence, if any Existing Holder who acquired shares of the
DARTS through BD transfers those shares to another Person other than pursuant to
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an Auction, then BD shall continue to be the Broker-Dealer for the shares so
transferred; provided, however, that if the transfer was effected by, or if the
transferee is, a Broker-Dealer other than BD, then such other Broker-Dealer
shall be the Broker-Dealer for such shares.
2.6. SETTLEMENT.
(a) If any Existing Holder on whose behalf BD has submitted a Bid or
Sell Order that was accepted in whole or in part fails to instruct its
Agent Member to deliver shares of the DARTS against payment therefor, BD
shall instruct such Agent Member to deliver to it such shares against
payment therefor and BD may deliver to the Potential Holder on whose
behalf BD submitted a Bid that was accepted in whole or in part a number
of shares of the DARTS that is less than the number of shares of the DARTS
specified in such Bid to the purchaser by such Potential Holder.
Notwithstanding the foregoing terms of this Section 2.6 (a), any delivery
or non-delivery of shares of DARTS which represents any departure from the
results of an Auction, as determined by the Trust Company, shall be of no
effect unless and until the Trust Company shall have been notified of such
delivery or non-delivery in accordance with Section 2.3 (e) hereof. The
Trust Company shall have no duty or liability with respect to enforcement
of this Section 2.6 (a).
(b) Neither the Trust Company nor the Company shall have any
responsibility or liability with respect to the failure of an Existing
Holder, a Potential Holder or its respective Agent Member to deliver
shares of the DARTS or to pay for shares of the DARTS sold or purchased
pursuant to the Auction Procedures or otherwise.
2.7. DISBURSEMENT OF ADDITIONAL DIVIDENDS. If the Company provides the Trust
Company and BD with a notice of its intent to pay Additional Dividends
substantially in the form set forth in Exhibit H hereto with appropriate
insertions (the "Additional Dividend Notice"), and not later than noon on the
Business day immediately preceding the Additional Dividend Payment Date
specified in such notice, the Trust Company or the Company irrevocably deposits
with BD sufficient funds for the payment of such Additional Dividends, BD shall
disburse such funds to Existing Holders and former Holders in the amounts and in
accordance with instructions specified in the Additional Dividend Notice. BD
shall have no duty or liability with respect to this Section 2.7 other than to
disburse the amounts received by it from the Trust Company or the Company in the
manner specified in the Additional Dividend Notice.
3. THE TRUST COMPANY.
3.1. DUTIES AND RESPONSIBILITIES.
(a) The Trust Company is acting solely as agent of the Company hereunder
and owes no fiduciary duties to any other Person by reason of this
Agreement.
(b) The Trust Company undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the
Trust Company.
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(c) In the absence of bad faith or negligence on its part, the Trust
Company shall not be liable for any action taken, suffered or omitted or
for any error of judgment made by it in the performance of its duties
under this Agreement. The Trust Company shall not be liable for any error
of judgment made in good faith unless the Trust Company shall have been
negligent in ascertaining the pertinent facts.
3.2. RIGHTS OF THE TRUST COMPANY.
(a) The Trust Company may rely and shall be protected in acting or
refraining from acting upon any communication authorized by this Agreement
and upon any written instruction, notice, request, direction, consent,
report, certificate, share certificate or other instrument, paper, or
document believed by it to be genuine. The Trust Company shall not be
liable for acting upon any telephone communication authorized by this
Agreement which the Trust Company believes in good faith to have been
given by the Company or by a Broker-Dealer. The Trust Company may record
by tape or otherwise telephone communications with the Broker-Dealers.
(b) The Trust Company may consult with counsel and the advice of such
counsel shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted by it hereunder in good faith and
in reliance thereon.
(c) The Trust Company shall not be required to advance, expend or risk
its own funds or otherwise incur or become exposed to financial liability
in the performance of its duties hereunder.
(d) The Trust Company may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys.
3.3. TRUST COMPANY'S DISCLAIMER. The Trust Company makes no representation as
to the validity or adequacy of this Agreement or the shares of the DARTS.
4. MISCELLANEOUS.
4.1. TERMINATION. Either party may terminate this Agreement at any time on
five days' notice to the other party. This Agreement shall terminate
automatically upon termination of the Trust Company Agreement.
4.2. AGENT MEMBER. At the date hereof BD is, and shall remain for the terms of
this Agreement, a participant in, or member of, the Securities Depository.
4.3. COMMUNICATIONS. Except for (i) communications authorized to be by
telephone by this Agreement or the Auction Procedures or (ii) communications in
connection with the Auctions (other than those expressly required to be in
writing), all notices, requests and other communications to either party
hereunder shall be in writing (including telecopy or similar writing) and shall
be given to such party, addressed to it, at its address or telecopier number set
forth below:
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If to BD: Jefferies & Co.
addressed: 000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxx
Telecopier No: 212-284-1790
Telephone No: 000-000-0000
If to the Auction Agent: Deutsche Bank Trust Company Americas
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxx
Telecopier No: (000) 000-0000
Telephone No: (000) 000-0000
or such other address, telephone or telecopier number as such party may
hereafter specify for such purpose by notice to the other party. Each such
notice, request or communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified herein and the
appropriate answer back is received or (ii) if given by any other means, when
delivered at the address specified herein. Communications shall be given on
behalf of BD by a BD Officer and on behalf of the Trust Company by an Authorized
Officer. BD may record telephone communications with the Trust Company.
4.4. ENTIRE AGREEMENT. This Agreement contains the entire agreement between
the parties relating to the subject matter hereof, and there are no other
representations, endorsements, promises, agreements or understandings, oral,
written or inferred, between the parties relating to the subject matter hereof.
4.5. BENEFITS. Nothing in this Agreement, express or implied, shall give to
any person, other than the Company, the Trust Company and BD and their
respective successors and assigns any benefits of any legal or equitable right,
remedy or claim under this Agreement.
4.6. AMENDMENT; WAIVER.
(a) This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a
written instrument signed by duly authorized representatives of the
parties hereto.
(b) Failure of either party to this Agreement to exercise any right or
remedy hereunder in the event of a breach of this Agreement by the other
party shall not constitute a waiver of any such right or remedy with
respect to any subsequent breach.
4.7. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by, the respective successors and assigns of
BD and the Trust Company.
4.8. SEVERABILITY. If any clause, provision or Section of this Agreement shall
be ruled invalid or unenforceable by any court of competent jurisdiction, the
invalidity or unenforceability of such clause, provision or Section shall not
affect any of the remaining clauses, provisions and sections hereof.
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4.9. EXECUTION IN COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
5. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
date first above written.
Deutsche Bank Trust Company Americas
By /s/ Xxxx Xxxxx
------------------------------------
Name: Xxxx Xxxxx
Title: Associate
Jefferies & Co.
By /s/ Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Managing Director
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